Key facts
- The US dollar surged past 160 against the Japanese yen.
- Strong US jobs data and services inflation data influenced dollar movements.
- Optimism for a Lebanon ceasefire contributed to the dollar slipping from a two-month high.
- South Korea is taking measures to defend the won, which hit its weakest level since 2009.
- South Korea launched joint inspections of foreign-exchange banks.
- The Philippine central bank cautioned banks against forex derivative speculation.
- The Philippine peso hit a record low against the US dollar.
- US stocks declined, potentially due to an increased supply of equities.
- The USDCAD pair is correcting lower toward support between 1.3868 and 1.3877.
- A Reuters survey predicts the US dollar will trade range-bound before weakening later in the year.
The US dollar has shown a complex performance, initially surging to break past 160 against the Japanese yen, driven by stronger-than-expected US jobs data and bolstered by geopolitical tensions and high oil prices which enhanced its safe-haven appeal. This surge occurred despite stalled US-Iran peace talks. However, the dollar later slipped from a two-month high as optimism for a Lebanon ceasefire grew and market sentiment shifted towards riskier assets, overriding its safe-haven demand. Strong US services inflation data reinforced expectations that the Federal Reserve will hold rates steady, while the Bank of Japan signaled a potential June rate hike.
In response to currency volatility, South Korea has introduced targeted measures to counter the won's slide to its weakest level since 2009, pledging firm action against speculative trading. Authorities have also launched joint inspections of major foreign-exchange banks for the first time in 14 years to defend the won. Similarly, the Philippine central bank cautioned banks against using forex derivatives to profit from currency volatility, as the peso recently hit a record low against the US dollar. The USDCAD pair is correcting lower toward a key support area between 1.3868 and 1.3877 after failing to sustain gains above 1.39238. This pullback follows a week-long rally driven by geopolitical tensions, widening interest-rate differentials, and soft Canadian economic data. Technical levels to watch include the 100-hour and 200-hour moving averages.
US stocks experienced a decline, breaking a rally that began in April. This downturn may be linked to the potential increase in the supply of publicly listed equities, driven by upcoming IPOs from major tech companies and private equity firms looking to divest holdings. This contrasts with a shrinking supply of listed companies over the past 30 years, which has supported rising prices. A Reuters survey suggests the US dollar is expected to trade range-bound in the near term before weakening later in the year, influenced by Middle East conflict resolution optimism and its temporary inflationary impact, though geopolitical risks create medium-term uncertainty.